GlaxoSmithKline (GSK), the world's leading pharmaceutical company, is to sell its first joint venture in China - GSK Pharmaceuticals (Chongqing) Ltd.

GSK (China) has agreed to transfer all of the 88.37 per cent shares it holds in GSK (Chongqing) to a local firm Southwest Pharmaceuticals Co Ltd, which previously owned a 8.31 per cent stake in the joint venture.

The two sides signed the share transfer agreement on August 30, and Southwest Pharmaceuticals will pay over 106 million yuan (US$12.8 million) for the deal, the local firm said.

It said that acquiring GSK (Chongqing) is beneficial to the firm's future development. It will help expand production scale, shorten construction periods, and speed up adjustment of products structure.

For GSK, the investment withdrawal from the Chongqing venture will support the international Montreal Protocol on Substances that Deplete the Ozone Layer agreement, said Lilian Xiao, media manager of GSK (China).

Established in 1988, GSK (Chongqing) mainly produces aerosol products for treating asthma and rhinitis, with most of products containing chlorofluorocarbons (CFCs), which were identified as contributing to the destruction of ozone and the damaging of the earth's ozone layer.

GSK has committed to eliminate the use of CFCs from its product portfolio and operations by 2010.

Another reason for the sale is GSK's overcapacity in China.

It is reported that the joint venture's output was only 40 per cent of its total capacity.

"After the merger of Glaxo Wellcome and SmithKline Beecham in 2000, there were too many production bases for GSK in China," said Hou Dakun, president of Beijing KevinKing Management Consulting Co Ltd, a leading consultant in the drug making industry.

The pharmaceutical giant owns seven ventures in China.

"The global giant needs to sell its surplus production bases in a bid to reduce its unnecessary investment in the Chinese market," Hou said.

Source: China Daily